What's The Difference Between A Mortgage & A Note?

These 2 terms can be very confusing to someone when they are buying a home.  You are told that you are applying for a mortgage but then when you get to closing your spouse may be required to sign the mortgage but are not on the loan.  That is because the mortgage isn’t the obligation to pay or have anything to do with the terms of the loan.  It is a recorded public document.

The note is the obligation to pay and contains the terms and conditions of the loan.  It is not recorded as a public document.

Investopedia defines a mortgage as “a debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front.  Mortgages are also known as “liens against property” or “claims on property”.”

Investopedia defines a note as “a written, dated and signed two-party instrument containing an unconditional promise by the maker to pay a definite sum of money to a payee on demand or at a specified future date.”